2024 (5) TMI 369 - AT - Service Tax

Service tax refund appeal dismissed due to time limitation under section 11B, refund cannot modify self-assessments

M/s. Kalyan Toll Infrastructure Ltd. Versus Commissioner Central Excise and CGST, Indore

M/s. Kalyan Toll Infrastructure Ltd. Versus Commissioner Central Excise and CGST, Indore - TMI The core legal questions considered by the Tribunal in this appeal are:1. Whether the appellant, having self-assessed and paid service tax without claiming exemption under a relevant notification, can file a refund claim after the statutory one-year period prescribed under section 11B of the Central Excise Act, 1994 (as applicable to service tax by virtue of section 83 of the Finance Act, 1994).2. Whether the time limit under section 11B for filing refund claims applies to cases where the tax was paid under self-assessment but was not actually payable due to entitlement to exemption.3. Whether refund proceedings can be used to re-open or modify an assessment, including self-assessment, or whether such proceedings are limited to execution of the assessment order as it stands.4. The applicability and binding effect of the Supreme Court judgment in ITC Ltd. vs Commissioner of Central Excise (2019) regarding the finality of self-assessment and refund claims, and whether this principle extends to service tax matters.5. The precedential value and applicability of the Larger Bench decision in Balaji Warehouse, which held that ITC Ltd. does not apply to service tax refund claims, vis-`a-vis the contrary ruling of the Delhi High Court in BT (India) Pvt. Ltd. that upheld ITC Ltd. principles for service tax.Issue-wise Detailed Analysis1. Applicability of Section 11B Time Limit for Refund Claims Where Tax Was Paid Under Self-AssessmentThe appellant paid service tax on taxable services rendered to MPPGCL but did not claim exemption under Notification No. 25/2012-ST. Subsequently, it filed a refund claim after more than one year from the date of payment, which was rejected as barred by the one-year limitation under section 11B of the Central Excise Act, 1994, applicable to service tax by section 83 of the Finance Act.The appellant contended that since no tax was actually payable (due to exemption entitlement), the amount paid was not tax but a deposit, and thus the limitation under section 11B should not apply. It relied on the constitutional principle under Article 265 that no tax shall be levied or collected except by authority of law, implying the government cannot retain amounts not legally due.The Revenue countered that the service was taxable, and the appellant's failure to claim exemption at the time of self-assessment did not negate the applicability of section 11B. The time limit applies uniformly to refund claims irrespective of the appellant's failure to claim exemption.The Tribunal noted that the facts were undisputed: the appellant self-assessed, paid service tax, and filed returns accordingly. The refund claim was made beyond the one-year period prescribed. The Tribunal upheld the application of the limitation period under section 11B, rejecting the appellant's argument that the amount was a deposit rather than tax.2. Whether Refund Proceedings Can Modify or Reopen Self-AssessmentThe appellant argued that refund proceedings should allow reconsideration of the exemption claim, effectively modifying the self-assessment. It relied on the Larger Bench decision in Balaji Warehouse, which held that self-assessment does not equate to an 'order of assessment' and thus refund claims can be entertained beyond the limitation period and can reconsider exemption claims.The Revenue relied on the Supreme Court judgment in ITC Ltd. vs Commissioner of Central Excise (2019), which held that self-assessments are appealable orders and refund proceedings cannot be used to modify or re-open assessments. The refund process is execution in nature and cannot alter the assessment or self-assessment.The Tribunal extensively analyzed the Supreme Court precedents including Priya Blue Industries and Flock (India) Pvt. Ltd., which established that refunds can only be granted pursuant to an assessment and cannot change the assessment itself. The Supreme Court in ITC Ltd. clarified that self-assessment is a deemed assessment, and unless modified or appealed, it must be followed in refund proceedings.The Tribunal further noted conflicting views within the Tribunal benches on this issue, which led to the Larger Bench decision in Balaji Warehouse. However, the Delhi High Court in BT (India) Pvt. Ltd. overruled the Larger Bench's view and held that ITC Ltd. applies to service tax refunds as well, emphasizing that refund proceedings cannot question or negate a self-assessed return unless it has been modified or re-opened through proper procedure.The Tribunal concurred with the Delhi High Court's reasoning, holding that refund proceedings cannot be used to alter or re-determine liabilities assessed through self-assessment. The appellant's failure to claim exemption at the time of self-assessment precludes refund unless the assessment is modified. Since no such modification or appeal occurred, the refund claim was rightly rejected.3. Treatment of Precedents and Conflicting DecisionsThe appellant relied heavily on the Larger Bench decision in Balaji Warehouse, which took a contrary view on the applicability of ITC Ltd. to service tax refunds. The Revenue relied on the Delhi High Court decision in BT (India) Pvt. Ltd., which explicitly overruled the Larger Bench and applied ITC Ltd. principles to service tax.The Tribunal gave precedence to the High Court ruling, noting that the Supreme Court's principle in ITC Ltd. is binding and applies equally to service tax matters. The Tribunal emphasized that the law cannot vary depending on which party benefits, and refund proceedings must be consistent with the finality of assessments, including self-assessments.4. Application of Constitutional Principle (Article 265)The appellant's reliance on Article 265 was addressed indirectly through the legal framework governing refund claims. The Tribunal observed that the statutory provisions and judicial precedents clearly regulate refund claims, including limitation periods and procedural safeguards. The constitutional principle that no tax shall be levied or collected except by authority of law does not override the statutory scheme that governs refund claims and self-assessment finality.Conclusions on IssuesThe Tribunal concluded that:The refund application filed beyond the one-year limitation period under section 11B is barred.The refund proceedings cannot be used to modify or re-open the self-assessment made by the appellant.The appellant's failure to claim exemption at the time of self-assessment means the assessment stands as is, and no refund is due.The Larger Bench decision in Balaji Warehouse is overruled by the Delhi High Court decision in BT (India) Pvt. Ltd., which applies the Supreme Court's ITC Ltd. principles to service tax refund claims.The refund claim was rightly rejected and the impugned order upheld.Significant HoldingsThe Tribunal preserved and relied upon the following crucial legal reasoning from the Supreme Court in ITC Ltd.:'The refund proceedings are in the nature of execution for refunding amount. It is not assessment or re-assessment proceedings at all... It will virtually amount to an order of assessment or re-assessment in case the Assistant Commissioner or Deputy Commissioner of Customs while dealing with refund application is permitted to adjudicate upon the entire issue which cannot be done in the ken of the refund provisions.'Further, the Tribunal emphasized the principle from BT (India) Pvt. Ltd.:'Unless the self-assessed return, as submitted had been questioned, re-opened or re-assessed and the assertion of the petitioner... questioned or negatived in accordance with the procedure prescribed under the Act, its claim for refund could not have been negated... The authority while considering an application for grant of refund neither sits in appeal nor is it entitled to review an assessment deemed to have been made.'The core principle established is that refund proceedings are execution proceedings that cannot alter or reopen assessments, including self-assessments, and statutory limitation periods for refund claims apply uniformly regardless of whether the tax was paid under protest or without claiming exemption.Accordingly, the Tribunal upheld the rejection of the refund claim filed beyond the prescribed time and dismissed the appeal.